Section R. 390.1807 - Terminations and refunds under 1988 limited benefits plan contractsRule 7.
(1) As used in this rule:(a) "Complete credit public educational institution" means a public educational institution whose in-state or in-district tuition rate is not more than 105% of the weighted average tuition cost of all state institutions of higher education in the academic year in which the beneficiary enrolls at the public educational institution.(b) "Complete credit state institution of higher education" means a state institution of higher education whose in-state tuition rate is not more than 105% of the weighted average tuition cost of all state institutions of higher education in the academic year in which the beneficiary enrolls at the higher education institution.(c) "Contract" means a limited benefits plan contract issued during 1988.(d) "Weighted average tuition cost of complete credit state institutions of higher education" means a figure arrived at as follows:(i) First, multiply the annual undergraduate tuition cost at each complete credit state institution of higher education by its total number of undergraduate fiscal year equated students.(ii) Second, add the results of paragraph (i) of this subdivision for all complete credit state institutions of higher education.(iii) Third, divide the result of paragraph (ii) of this subdivision by the total number of undergraduate fiscal year equated students for all complete credit state institutions of higher education.(2) A contract may be terminated in the following instances upon a written request to the trust by the beneficiary or by a person who has legal authority to act on behalf of a beneficiary who has died or is disabled:(a) The beneficiary has reached 18 years of age or has received a high school diploma and certifies to 1 of the following:(i) He or she will attend an independent, degree-granting college or university and directs payment of any refund to that independent, degree-granting college or university.(ii) He or she will attend an out-of-state institution of higher education.(iii) He or she will attend a higher education institution under a full-tuition scholarship.(iv) He or she does not plan to attend a higher education institution.(v) He or she will attend an independent, degree-granting college or university, but does not direct payment of any refund to that independent, degree-granting college or university.(vi) He or she will attend a community or junior college.(b) The beneficiary has died or is disabled.(c) The board approves a termination for any other reason.(3) The amount of the refund for a contract terminated pursuant to the provisions of subrule (2) of this rule shall be as follows:(a) If the contract is terminated pursuant to the provisions of subrule (2)(a)(i) of this rule, the refund shall be the weighted average tuition cost of complete credit state institutions of higher education based upon the last full academic year before the refund payments commence for the number of academic years covered by the contract.(b) If the contract is terminated pursuant to the provisions of subrule (2)(a)(ii) to (vi), (b), or (c) of this rule, the refund shall be the lowest tuition cost based upon the last full academic year before the refund payments commence, and for the number of years covered by the contract, less a termination fee.(c) A refund shall not be less than the prepaid tuition amount.(4) Refunds under the provisions of subrule (3) of this rule shall be made according to the following schedule: (a) A refund for a termination allowed under the provisions of subrule (2)(a)(i) or (vi) of this rule shall be made to the higher education institution to which it is directed in payments equal to the tuition charges of the higher education institution. However, the total amount transferred to a higher education institution shall not be more than the maximum refund due. Any refund amount determined pursuant to the provisions of subrule (3) of this rule which has not been paid to a higher education institution and which is remaining on August 15 of the fourth year following the last full academic year before the refund commences shall be refunded to the person specified in the contract.(b) A refund for a termination allowed under the provisions of subrule (2)(a)(ii), (iii), (iv), or (v) or (c) of this subrule shall be made in 4 annual installments as follows: (i) If an annual installment is directed to be paid to the higher education institution, the annual installment shall be paid as necessary to cover tuition charges, not including mandatory fees, of the higher education institution. Any remaining annual installment amounts in excess of the tuition charges, not including mandatory fees, for the academic year shall be returned at the end of the academic year to the person specified in the contract.(ii) If payment is directed to other than a higher education institution, the annual installment will be paid not later than August 15 of each year.(iii) Any refund amount due under the provisions of subrule (3)(c) of this rule which is remaining on August 15 of the fourth year following the last full academic year before the refund commences shall be refunded to the person specified in the contract.(c) A refund for a termination allowed under the provisions of subrule (2)(b) of this rule shall be paid in a lump sum within 60 days after the trust's approval of the requested termination.(5) If educational benefits have been received under the contract before the contract is terminated, the refund pursuant to the provisions of subrule (3) of this rule shall be reduced by the amount transferred to public educational institutions to pay for tuition charges for the beneficiary. If the contract is terminated for a reason set forth in subrule (2)(a)(ii), (iii), (iv), or (v) or (c) of this rule, the reduction shall be made in equal amounts against each annual installment.(6) If the contract is paid for, in whole or in part, from the proceeds of a secured loan and the trust is required to pay a refund because the contract is terminated due to the death or disability of the beneficiary, termination by the trust for fraud, or termination by the trust due to actuarial unsoundness, the refund shall be reduced by the amounts required to pay off the secured loan, any early withdrawal fee, and the trust's expenses for processing payment on the secured loan.(7) A beneficiary who requests a refund, except for a refund pursuant to a termination under the provisions of subrule (2)(b) of this rule, shall give the trust written notice by July 15 before the academic year in which the refund payments are to commence. The notice shall be received or postmarked by July 15 or the trust may postpone the commencement of the refund.Mich. Admin. Code R. 390.1807